Americans continue to anticipate high inflation rates, according to a recent survey by the Federal Reserve Bank of New York. The median expectation for the next year is a 3.7% increase, slightly up from the previous month's forecast of 3.6%. Inflation is expected to hover around 3% three years from now and slightly decrease to 2.8% after five years, surpassing the Federal Reserve's target of 2%.
The survey findings, published on Tuesday, indicate that while food prices are predicted to rise, costs for essential items such as gas, medical care, and rent are expected to drop. These expectations play a significant role in guiding Federal Reserve policymakers, including Chairman Jerome Powell, in their strategy to mitigate the inflation crisis and reach their 2% inflation goal.
This comes after policymakers have already increased the benchmark federal funds rate 11 times over the past 16 months, bringing it to its highest level since 2001 in an effort to curb inflation.
The survey also highlights growing concerns about the labor market and household finances. It reports that the median expected growth in household income has slightly risen by 0.1 percentage points to 3% in September. However, perceptions of credit access compared with last year have deteriorated, with more households reporting difficulties in obtaining credit.
The survey also showed that the expected growth rate of college costs is set to slow down significantly to 5.8%, marking the largest one-month decline since the survey began in 2013. The expected earnings growth for next year is pegged at 3%, with this change being most pronounced among those with college degrees.
Despite increased borrowing costs making credit accessibility more challenging for a larger share of households, optimism about the stock market has grown. The probability of the stock market being higher in a year has increased by 1.5 percentage points to 36.7%.
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